Robert Kuttner picks up a theme that we'll surely hear again and again in the coming weeks and months, at least from Democrats with a backbone, and even perhaps from the few remaining honest Republicans in Congress, if that endangered species hasn't already died out: namely, there is no Social Security crisis.
Here's the first part of Kuttner's article:
Bush's entire plan for Social Security privatization rests on the premise that the system is in severe crisis. But a careful look at the numbers suggests that the financial crisis is largely a myth.
For years, the Social Security trustees have used very conservative assumptions about future rates of economic growth, productivity growth, and growth of the labor force. These assumptions, in turn, affect the projected payroll tax collections that will fund Social Security payouts. Five years ago, in the late 1990s, they estimated the long-term economic growth rate at just 1.7 percent. The reality has been well over 3 percent.
Most economists now believe the economy can do a lot better than 1.7 percent annual growth. In its 1997 report, the Trustees projected that the system would no longer be able to meet all its obligations by 2029. Just six years later in 2003, based on their acknowledgement of stronger economic growth, the Trustees moved the crisis date back to 2042. So if the system can gain thirteen years of life in six years, there's not much of a crisis.
But that's just the beginning. In June, the bipartisan Congressional Budget office used more realistic assumptions about economic growth. CBO puts the first shortfall year at 2052, not 2042, and it projects Social Security's 75-year shortfall at only about four-tenths of one percent of Gross Domestic Product. Currently, that's just over $40 billion a year, or one-fifth of the revenues that the Bush administration gave up in tax cuts for the wealthy.
Simply restoring pre-Bush tax rates on the richest one percent of Americans could bring the Social Security system into balance indefinitely, without reducing promised payouts by one penny.
Paul Krugman recently made a similar argument as I've already blogged.
The GOP is developing another ploy to reward its existing constituencies i.e., its anti-tax wing, the already-well-to-do, and Wall Street, which will manage all the money that will pour into private accounts and to develop a new one i.e., all those voters who will express their gratitude for private accounts by voting Republican. More pressing, though, if you ask me, is its desire to tear down, or at least damage, one of the great successess of 20th century liberalism.